Munich Re delivered a first-quarter profit of €1.714 billion, an eye-catching 57 percent jump from the €1.094 billion it posted a year earlier, yet the market’s reaction has been anything but celebratory. The disconnect stems from a deliberate contraction at the heart of the reinsurance giant’s business: a planned reduction in written volume that investors are reading as a signal of tougher pricing conditions ahead.
The underwriting engine performed exceptionally well. The combined ratio in property-casualty reinsurance improved to 66.8 percent from 83.9 percent, while the insurance-technical result surged to €2.676 billion. A sharp drop in large natural catastrophe losses — just €130 million versus more than €1 billion in the prior year, when California wildfires weighed heavily — was the primary driver. ERGO, the group’s primary insurance arm, added €235 million to the bottom line, underscoring the value of a diversified earnings base.
A Market That Punishes Prudence
Where the tension emerges is in the renewal cycle. In the April 1 renewals, Munich Re deliberately walked away from contracts it deemed insufficiently profitable, slashing its written volume by 18.5 percent. Adjusted for inflation and shifting risk profiles, prices in the new business book fell 3.1 percent. For a reinsurer, that is a sensitive metric: portfolio quality supports near-term results, but new business margins determine earnings power over the next several years.
The share price closed Friday at €475.10, rising 1.41 percent on the day, but that does little to mask the damage. The stock is down 15.61 percent over the past month and sits only 1.67 percent above its 52-week low from May 13. From the August high of €605.00, the decline exceeds one-fifth. On a weekly basis, the loss stands at 5.70 percent.
Should investors sell immediately? Or is it worth buying Münchener Rück?
Technical Resistance and Support Levels
The chart offers little comfort. Munich Re trades 10.65 percent below its 50-day moving average and 11.63 percent below the 200-day line. A short-term resistance zone between €486.90 and €494.40 looms above, while a daily close below €457.00 would flash a fresh warning, opening the door to levels around €443.60.
Management is betting that discipline will be rewarded. The Solvency II ratio stood at 292 percent at the end of March, leaving ample room to absorb shocks, return capital, and maintain selective underwriting. A €2.25 billion share buyback program has been running since April 29. The full-year profit target of €6.3 billion for 2026 remains unchanged.
ERGO’s Restructuring Adds a Second Pillar
The group is also fortifying its earnings base through ERGO. By 2030, around 1,000 jobs will be cut in Germany, while up to 700 employees transition to new roles via a reskilling academy. Annual savings are expected to reach roughly €600 million by the end of the decade. The increased use of artificial intelligence and process optimization is central to that plan, reducing the company’s reliance on volatile large-loss events in reinsurance.
With no immediate corporate events on the calendar, the coming weeks will test whether the stock can find a floor. The market’s focus will sharpen on the next renewal rounds and the severity of the North American hurricane season, ahead of half-year results due August 7. For now, Munich Re is betting that a smaller, better-priced book will prove more valuable than chasing top-line growth in a softening market.
Ad
Münchener Rück Stock: Buy or Sell?! New Münchener Rück Analysis from May 16 delivers the answer:
The latest Münchener Rück figures speak for themselves: Urgent action needed for Münchener Rück investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from May 16.
Münchener Rück: Buy or sell? Read more here...
